Cheapest country to start a forex broker

In this article we’ll look at what the cheapest country to start a forex broker in is.

One of the major hurdles to starting a forex broker today is the cost required to set up a regulated company and get a licence in certain jurisdictions.

For example, the licencing process alone for the UK can run into the hundreds of thousands of pounds. And that’s just for acquiring the licence. It doesn’t include the money you would need to maintain and operate the business.

As a result a lot of people that want to start a forex broker will try to find a jurisdiction that has lower costs.

The countries we look at in this article should not be considered an exhaustive list but it should give you some idea of what your options are when trying to start a forex broker.

Before we look at those countries, it’s worth highlighting the positives and negatives of starting a forex broker in a lower cost jurisdiction, as well as addressing the myth that you have to go offshore to start a forex broker cheaply.

What are the benefits of starting a forex broker in a cheaper country?

There are two primary benefits of starting a forex broker in a region with lower costs.

1. The costs

It’s axiomatic that starting a forex broker in a jurisdiction where it’s cheaper to do so is going to cost you less money.

2. Regulations

The regulatory burden, which also feeds into costs, is often much less cumbersome in jurisdictions where it is cheaper to start a forex broker.

What are the negatives of starting a forex broker in a cheaper country?

Starting a forex broker in a jurisdiction where it’s cheaper to do so has several downsides that you must be aware of before you start a forex broker in one.

1. Banking 

Your ability to access payments and banking services is likely to be seriously reduced if you decide to start a forex broker in a lower cost region.

2. Access to clients

If you start a forex broker in a lower cost region then you will be limited in who you can market your services to. Unless you want to breach regulations in those jurisdictions, it will mean lots of markets, which tend to have higher value clients, won’t be accessible to you.

3. Branding

Having a tier-1 regulatory licence from a jurisdiction like the UK is seen as a significant trust marker by clients. The cheapest jurisdictions to start a forex broker tend to be in offshore locations. Your ability to attract higher quality clients will be reduced as a result.

Do you have to go offshore to start a forex broker cheaply?

The simple answer to this is ‘no’.

There is a common misconception that if you want to start a forex broker in the UK or other developed countries it is going to cost you a huge amount of money.

That is true if you start from scratch and apply for a full scope brokerage licence from the local regulator. 

But you do not have to do that and there are other ways you can start a forex broker in the UK at a much lower cost. 

We have a whole article looking at ways you can start a forex broker in the UK affordably, so it is worth reading that if you are interested in learning how to do it in a more affordable way.

Low cost jurisdictions to start a forex broker

Ok so let’s say you’ve read all of this and are still happy to start a forex broker in a cheaper jurisdiction. You still have quite a few options, so it’s worth knowing the positives and benefits of each before making a decision as to which one you’ll choose to open your forex brokerage in.

Set up a forex broker in St Vincent and the Grenadines

St Vincent and the Grenadines has become one of the most popular places to start a forex broker in the past decade. 

The reason for that is simple – it is cheap and quick to set up a broker there, there are no taxes, and ongoing costs to maintain the business are extremely low. 

There are anonymity benefits as your details are not available publicly. You are also not required to file regular accounts with the authorities.

However, there are some key downsides that you need to be aware of here too. 

One is that St Vincent and the Grenadines has no regulations governing the FX/CFD industry. As a result, you will struggle to find banking solutions for your business and may also find it harder to access technology providers.

More importantly, the authorities in St Vincent and the Grenadines put out a statement in early 2023, saying that FX/CFD brokers based in the island would have to prove they were also regulated in the jurisdictions they do business in.

It is not clear what prompted this or how strictly it is being enforced. Nonetheless, anyone thinking of setting up in St Vincent and the Grenadines should be aware of this and the potentially damaging impact it could have on their business.

Set up a forex broker in St Lucia

St Lucia has emerged as a popular option for people looking to start a forex broker, mainly since authorities in St Vincent and the Grenadines said brokers based there would need to prove they are licenced in every region they operate in.

Like St Vincent and the Grenadines, St Lucia is attractive because the start up costs are low and it does not take a long time to get your business up and running. 

There is also no tax, except on income derived from St Lucia – something that is unlikely to impact forex brokers. The ongoing costs of running your business are also low, potentially running at well below $1,000 per year.

However, as with St Vincent and the Grenadines, there is no regulatory framework under which providers of CFDs operate. As a result, you are again likely to face problems when accessing banking and payments services. 

Set up a forex broker in Vanuatu

As with the other jurisdictions listed in this guide, Vanuatu became a popular choice for brokers after the European Securities and Markets Authority (ESMA) put in place stricter regulations governing the forex industry in 2018.

At that time, Vanuatu was a very easy place to set up, with low costs and quick company registration. At one point over 500 forex brokers were registered on the island.

That has changed in the past couple of years, with the Vanuatu Financial Services Commission (VFSC) becoming stricter in what they require brokers to do. However, it is still a much more affordable place to start a forex broker compared to tier-1 jurisdictions.

One of the key changes that the financial authority made was that it required brokers to actually have a physical presence in Vanuatu, with a local director and manager. 

The other was that brokers have to buy a $50,000 Vanuatu government bond. It is important to note that this is not the same as maintaining $50,000 in paid up capital. 

If you end up wanting to close your forex broker, this is something to be seriously careful of because it will not be a case of simply going to the bank and transferring your $50,000 out – it may take a considerable amount of time to get that money back. You will also lose this money entirely if the VFSC revokes your licence for fraud.

That move reflects the desire of the VFSC to improve the quality of the brokers operating from Vanuatu. As much as it might be easy to think that Vanuatu is a far away island and shouldn’t be taken seriously, the VFSC does take steps against firms and has revoked the licence of at least one major broker before.

Compared to most tier-1 jurisdictions, Vanuatu is not an expensive place to set up shop. But relative to the cheapest jurisdictions to start a forex broker, like St Lucia, it is still comparatively expensive.

The upside to this is that your access to banking and payments facilities, although still not perfect, will be better than if you start your forex broker in St Lucia or St Vincent and the Grenadines.

Set up a forex broker in Mauritius

Mauritius has become a popular place for retail brokers to get a licence from the local regulator, the Mauritian Financial Services Commission.

The key factor here is that the capital requirement for brokers getting a licence there is low at 1m Mauritian rupees, which is equivalent to about $22,500 at the time of writing. 

Mauritius also has some history – much like the Seychelles – as an offshore financial centre, which lends some level of respectability to the licence itself.

Another key attraction is the fact that there are no caps on the leverage you can offer to traders and there are fewer restrictions on how you can market your product compared to European countries.

The main downside for companies or individuals thinking of starting a forex broker in Mauritius is likely to be the physical office requirement. There are ways to minimise the cost of doing this but it remains in play and you do have to do it.

Set up a forex broker in the Seychelles

The Seychelles is arguably the best place to start a forex broker if you do not have a huge amount of start up capital.

The reason for that is simple – it is not that expensive, it is relatively quick to set up a company there, and it doesn’t take too long to acquire a licence from the Seychelles Financial Services Authority. 

The Seychelles also has a long history as an offshore financial centre. This means there is a level of respectability to the licence, but it can also ease your ability to get access to banking services.

There are also not that many restrictions on what you can do when offering FX/CFDs to retail clients. Most notably, you can offer high leverage ratios to clients, partner with IBs and can offer PAMM / MAM accounts.

As with the other jurisdictions in this list, the Seychelles is still not the perfect option. Firstly, banking services may be smoother than in other regions, but they can still be difficult to maintain.

If you are also attempting to do a true ‘start up’, then the costs of setting up may be prohibitively expensive for you as well.

Finally, the Seychelles does require you to maintain a local presence. Although there are firms which can help you with this set up, it can be costly to set up and maintain.

Set up a forex broker in Labuan

Labuan is an island that is part of Malaysia. However, it has its own financial regulator, the Labuan Financial Services Authority, and operates as an offshore financial centre.

The jurisdiction has become a popular spot for brokers looking for a more affordable licence but with a higher level of credibility and better access to banking services.

A Labuan licence can be obtained relatively quickly but it requires more time and money than the other jurisdictions we’ve looked at so far. Firstly, you will have to submit a range of documents to the regulator and you may have to go for a physical interview with them. That includes proof that you have experience in the forex brokerage industry.

On the financial side, the key fact here is that you will have to deposit RM 1,000,000 (approximately $220,000 at the time of writing) in order to get your licence. This money must be kept as a minimum capital requirement and you cannot simply deposit it and then use the funds to operate your business.

If you do get the licence, you will have to have an office in Labuan and you must have at least two local employees based in the jurisdiction itself, although there are consultancy firms that can help you with this set up.

Another factor to be aware of here is that there are regulations with regard to offering FX/CFDs that you will have to adhere to. It is vital to note that the Labuan license only permits offering currency and cryptocurrency products. You cannot offer clients CFDs on indices, shares, or commodities.

For currency products, leverage is capped at 100:1. There are other rules that you have to adhere to as well, such as how you handle client money and execution on the prices you offer.

In many ways these rules are lighter touch versions of what you get in tier-1 jurisdictions, like the UK or Australia. 

This is actually a positive in the sense that it makes Labuan a more respectable jurisdiction and, combined with the higher capital requirement, this is more likely to open up banking lines for you. Indeed, Labuan is seen as offering a good balance for forex brokers, in terms of offering good banking services, a comparatively affordable licence, and relatively respectable branding.

Nonetheless, for someone who is really looking to start a cheap forex broker, Labuan may not be the best option, mainly because of the high capital requirements and restrictions on the products you can offer.

How much does it actually cost to get a forex broker licence in these countries?

One of the things you will have likely noticed in the tables we’ve listed above is that there are not many firm prices for how much it will cost you to set up a forex broker in a given region. Instead we approximate them. There is a good reason for that.

In theory, these fees are knowable. For example, if you go to register a company in the Seychelles, that will have a fixed cost attached to it.

The reason we do not list a firm price is because almost everyone that starts a forex broker, whether it’s in St Lucia or a tier-1 jurisdiction like the UK, will hire consultants and/or lawyers to help them.

The fees these consultants charge are likely to be significantly higher than the cost of ‘going it alone’. But given that licence applications can be convoluted, lengthy processes, that is ultimately why you are paying them – to handle that process for you.

As these fees vary significantly and we cannot know which consultant you will use or how much they will charge you, it is impossible to say exactly what the price will be.

Why you should be careful of lawyers and consultants when starting a forex broker

You can probably infer from this that shopping around between consultants is a good idea. These companies will vary on how much they charge you and the level of service they provide.

Consultants and lawyers in this arena are not inherently bad but what you do need to keep in mind is that they are often motivated by the ability to pick up fees, rather than doing what’s best for your company.

As such, we would always suggest doing plenty of due diligence on the company that’s helping you to get licenced, given the potential for conflicts of interest that exists there.

Why you should not get a forex broker licence in the Comoros 

A good example of why you need to be careful is the Comoros. 

Over the course of a couple of years, substantial numbers of brokers got ‘regulated’ by an entity calling itself the Mwali International Services Authority.

This purported to be a regulator in the Comoros, a small country off the coast of East Africa.

The regulator turned out to be fraudulent – it was just made up by someone and used as a way to clip off fees from brokers that wanted a ‘licence’ offshore.

However, many legal firms pushed their forex broker clients to sign up to the regulator, purely because it was an easy way for them to pick up fees.

Hopefully this provides a simple example of why you should make sure any legal consultants have your best interests at heart.

Final thoughts: Is it worth setting up an offshore broker?

Unless you have raised significant capital from venture capital or private equity investors, you are unlikely to have huge amounts of money to put towards starting a forex broker.

This is the key reason why it’s worth starting a forex broker offshore – cost.

The downsides, however, are many. Keeping payment and banking systems in place can be a constant headache. You will not have the best brand on the market. And you will also be limited where you can do business or forced into doing more ‘grey’ area activity, by looking for methods to onboard unsolicited clients.

That is why starting a forex broker offshore can be a good short term solution for anyone short of capital. However, it is typically a better long-term strategy to get a licence in a tier-1 jurisdiction and then grow your business that way.

Or to think about it in a simple way – setting up a forex broker cheaply has its benefits, but it comes at a price.